Great Business Model - Co drives revenue from research, consulting, and events/symposiums. Research is the most important driver as it comprises over 60% of EBIT. Incremental margins in this business are 80%+ (fixed base of researchers with low variable costs) and mgmt believes they can double the revenue base in Research while keeping cost base relatively flat. Revenues are based on subscriptions and thus has high recurring revenues. For 70% of their business (research and events), WC is a source of cash since they receive fees/billings upfront. Product is pretty sticky with client retention tracking around 80% for at least the past four years. In the mid-late 90s, this metric was higher in the 85-90% range and mgmt does believe they can drive retention back to those levels as more new products are rolled out. Wallet retention has been tracking around 90% which mgmt believes is sustainable (last qtr it was 104%). Capex is low at under 2% of revs and coupled with positive WC, FCF is typically greater than NI. From a market standpoint, IT is the leader in the space from a revenue perspective but still has room for substantial penetration (studies suggest market only 10% penetrated right now).

Historical Margins & Expansion Story - In the mid-90s, EBITDA margins on the research side used to run in the low-mid 20% range. In 2006, EBITDA margins were 14.7%. IT's three-year goal (announced this past spring) is to get EBITDA margins in the 19-22% range. This ramp although meaningful (especially to EPS growth given high leverage) could still be conservative based on historical peak margins of the business. Mgmt admits there is nothing preventing them from attaining margins in the mid-20% range as in the past. 

Buybacks likely to be Use of Cash - The co. has about $90M in cash and $400M in debt. In Q1 they bought back $23M of stock and still have $180M left in thier authorization. Guidance assumes sharecount shrinks some more and so they continue to exhibit propensity to buyback stock. They will generate 150M of cash flow this year alone. The co. continues to feel comfortable with their leverage.

Management - Underlying the fundamental story of Gartner is the drive of a new management team to turn around the business following a rough patch that began in 2000. Gene Hall joined the management team as CEO in 2004; he was previously a senior executive at ADP and primary reason for joining was oppty to increase price and drive more sales driven strategy which he believed was under-appreciated. In its tenure thus far, he has completed an acquisition of a key competitor, Meta Group, cleaned up the company’s capital structure (was dual class stock), initiated a price increase, introduced a new sales model (which includes a dramatic ramp-up in the number of sales heads), and introduced new products (Gartner for IT leaders).

Large Holders: SilverLake & ValueAct - between the two groups, they hold 33% of the stock. SilverLake did a secondary in May 2006 with most of the stock sold to the public around $14.75/share. They still own 13% of the co. Gartner bought 1M shares back in the offering and CEO bought 200K personally. VA also just bought 2M shares from SilverLake at $15.75/share in Fall 06 so there is good support from large holders at this level. In speaking to IR, the co. could buy more stock back from SilverLake going forward. If Silverlake decides to lighten up some more, I would expect the company to participate again in a transaction to buyback some of the shares.

Leveraged to IT Discretionary Spending - in any economic turn or dip in IT spending, gartner would be exposed. That said, the spend on gartner's products is relatively small compared to other components of IT budget spending. Their average client spends $64K per year vs. IT budgets on avg. of a few MM/year.